Can a weakening ringgit and cheaper living draw expatriates to Malaysia?

By Vincent Tan

The past few months have seen a spate of announcements and changes to Malaysia's policies concerning foreign talent recruitment and the attracting of expatriates.

Indeed, from a drastic shortening of the expatriate visa application process to statements about the government's plan to make the Malaysia My Second Home (MM2H) long-term visa initiative more flexible, the message appears to be that Putrajaya is serious about making Malaysia appealing to foreign nationals once again.

All this, however, has come in the wake of a weakening ringgit.

Thus, the question being asked is: could Malaysia’s poor-performing currency ultimately entice expatriates, foreign retirees and other high-valued foreigners to set up home in the country?

Looking better

To be clear, tweaks to programmes such as the MM2H scheme are much needed, especially in regard to the requirements of applicants needing RM1.5 million in liquid assets (RM350,000-RM500,000 previously) and a minimum monthly income of RM40,000 (RM10,000 previously).

Even so, industry players suggest that it is the local currency — which was trading at RM3.4967 against the Singapore dollar at one point in July — that has really made the difference.

Sean Thong, a Kuala Lumpur-based real estate agent, says enquiries by foreigners for both sale and rental properties have been on the up. Yet while policy changes have played a part, the bigger pull factor appears to be the currently cheaper ringgit and Malaysia's lower cost of living.

"Singapore, for example, recently announced that it was increasing taxes on property purchased by foreigners. (So some have started) to look at Malaysia as a more affordable alternative," he explained.

But does a favourable exchange rate suggest that things could soon go back to the way they used to be, with foreign nationals flocking to the country to live and work?

Anthony Liew, president of the MM2H Consultants Association (MM2HCA), is unsure.

"There's still a lot to recommend about Malaysia as a permanent residence, such as our multi-ethnic and multi-lingual society, which allows us to cater to expats from all over the globe ... but we still lag in terms of offerings (for foreign nationals), as well as flexibility.

"(So while) the numbers are climbing back up, it will certainly be quite some time before we see the same figures in terms of pre-pandemic MM2H applications."

Close competition

All across Southeast Asia, countries have been attempting to attract foreign nationals.

Hence the host of announcements of initiatives and tweaks to existing immigration and residence policies; from Indonesia's tax-free digital nomad pass for Bali to the Philippines' retirement visa and Thailand's long-term resident plan.

This, then, is why many feel Malaysia needs to up its game.

Says MM2HCA's Liew, as things stand, Singapore is the region's leader for drawing foreign talent and expats. But Malaysia ought to look at Thailand in regard to improving its schemes and packages.

"In terms of the foreign residents we attract, our package pricing and so on, Thailand is our closest competition. (And they have) more flexibility in terms of packages offered.

"There is something for every different type of expat, from the single foreigner, to families or retirees, and investors," he said.

In other words, Malaysia can't just rely on minor amendments to existing policies or a drop in the ringgit's current low value.

Facilitative measures

Economics professor Dr Yeah Kim Leng, meanwhile, believes that Putrajaya's recent policy changes and announcements are "facilitative measures" that enhance Malaysia's attractiveness to foreigners.

That being said, many other factors are taken into consideration when foreign nationals look to make a country their second home, including opportunities for personal growth and importantly, political stability and personal security.

As such, while a weaker local currency could provide expatriates, foreign retirees and their families with greater purchasing power, Malaysia's advantage in this respect is only temporary.

"The purchasing power factor due to local currency weakness is transitory, given that if the local currency continues to depreciate, the expatriate will not be better off in the longer term," explained the Sunway University don.

"Hence, a country's stable economic and financial conditions amid steady growth and low inflation performance are more important considerations to the expatriate compared with the attractiveness of a weak local currency."

In this respect, then, Prime Minister Anwar Ibrahim's recent unveiling of a 10-year plan to reset Malaysia's growth trajectory and be counted among the world's 30 largest economies could hold the long-term key.

For the moment, however, the ringgit is proving mighty attractive.

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